Strategic Sourcing Solutions to Enhance Your Bottom Line
Strategic sourcing is vital to procurement and the supply chain overall, as it allows companies to gain the lowest cost of a good or service while minimizing supply chain risk. While efficient sourcing is achieved by finding, engaging, and evaluating vendors to get the best value and highest cost savings, properly implemented strategic sourcing techniques will boost your bottom line every time.
To maximize this gain and streamline your process, you must implement a strategic sourcing solution that fits your business needs and allows your teams to spend more time on important activities. Having the right strategic sourcing solutions, tools, and tactics can help companies achieve better ROI, streamlining the overall strategic sourcing process.
Read on to learn more about the importance of strategic sourcing, how to use advanced sourcing techniques to find the best suppliers and the difference between strategic sourcing and procurement.
What Is Strategic Sourcing?
Strategic eSourcing is a process that promotes efficiency throughout the procurement cycle by finding the lowest cost, consolidating purchasing power, and mitigating risk. In turn, strategic sourcing negotiation tactics result in long-term, collaborative relationships with strategic suppliers, improve ROI, and enhance the bottom line.
Strategic sourcing is often easily confused with eProcurement itself. Procurement is more concerned with day-to-day, tactical operations, while strategic sourcing solutions are concerned with many aspects of sourcing materials and/or services. Examples of strategic sourcing can include choosing suppliers based on supply, service, innovation, regulatory compliance, and quality. Price is also an obvious factor, but decisions using strategic sourcing solutions are never based on price alone.
There are key differences between tactical sourcing vs.strategic sourcing.In tactical sourcing, immediacy is the key factor, as the product or service is needed as soon as possible. As the name suggests, strategic sourcing has a strategy behind vetting and choosing suppliers. eRFX software is a good choice for strategic sourcing solutions as it provides a composable platform that’s individualized for each company’s needs.
Strategic Sourcing Solutions: Your Sourcing Tactics
A winning sourcing strategy can be represented in three components and their processes:
- Capabilities (the “power” of your solution, its functionalities, etc.)
- Speed (reduction of manual tasks, communication expediency)
- Visibility (spend analytics and having actionable data to make informed decisions)
If a solution doesn’t have sufficient functionality or capacity to fully cover your needs, then it’s not the right solution for your business. Provided you’re in touch with your needs and capabilities (i.e, market intelligence, category strategy, RFx management, negotiation, and implementation), you can induce greater speed into the sourcing process by increasing communication and reducing manual labor. By doing this, you’ll also lower your total cost per acquisition.
With spend analytics capabilities built into your software platform, you’ll be able to make a data-driven, strategic purchasing decision.
Strategic Sourcing Solutions: How to Choose the Best Suppliers
Your goal should include tracking supplier data over time to ensure you benefit from the best value and outcome. Another important part of strategic sourcing is choosing the best supplier for every situation.
Follow this five-step process to secure the best suppliers when strategically sourcing—once you’re used to this process, it should be intuitive to choose the best supplier.
- Build a strategy after you collect and evaluate data. Perform a spend analysis, gather data, such as tracking supplier data over time to ensure you continue to get the best value and outcome from the relationship, and have a solid project scope.
- Determine the right engagement strategy. Do you need to conduct a reverse auction, or is it more of a case for a detailed RFQ? You’ll have to look at your project’s complexity and spend initiatives to determine this.
- Research and award the supplier. Research is important—does the supplier act ethically and do they have eco-friendly practices? Are their products and/or services of high quality? Are they communicative and transparent? Once you’ve made a choice, whether running an eAuction or using RFQ, it’s time to award the contract.
- Implementation of contract. Communication is the most important piece here (which is why research is imperative), to decide on contract details.
- Invoice monitoring and setup. Once the supplier is onboarded, monitor their quality control and overall performance. This should be implemented within your strategic sourcing solution software, and is an important step, as you return to it every time you perform strategic sourcing.
Strategic Sourcing Solutions: What Are the Must-have Features of Sourcing Software?
Gone are the days of back-and-forth emails and calls, paper trails, and spreadsheets. In modern times, you have composable, individualized strategic sourcing software at your fingertips to ensure the process goes smoothly. Composable software is tailored so that it reflects your strategic sourcing needs as a company. However, there are some other must-have features when it comes to your software:
- Intuitive and easy to use for everyone, including your suppliers
- Has discovery tools and the ability to collect requirements
- Includes all RFx capabilities
- Has tools to collaborate with suppliers
- Automated evaluation and scoring
Choosing software with these features gives you a better platform for successful strategic sourcing. Provided there’s only a short learning curve, you should be able to onboard your colleagues and suppliers without frustration.
Strategic sourcing is especially vital in procurement. With sourcing strategies and the right software by your side, you should streamline the majority of your sourcing processes, improving ROI and boosting your bottom line.
To learn more about easy-to-use strategic sourcing solutions and software with robust features, speak to a Simfoni representative today about conducting a demo.